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Norwegian Cruise Line (NCLH) Up 29.4% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Norwegian Cruise Line (NCLH - Free Report) . Shares have added about 29.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Norwegian Cruise Line due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Norwegian Cruise Q2 Earnings Miss Estimates, Decline Y/Y

Norwegian Cruise reported second-quarter 2020 results, wherein the bottom line missed the Zacks Consensus Estimate but the top line surpassed the same. Moreover, both earnings and revenues declined sharply year over year owing to the coronavirus-induced shutdowns.

Earnings & Revenue Discussion

The company reported adjusted loss per share of $2.78, wider than the Zacks Consensus Estimate of a loss of $2.19. Notably, the company had reported earnings per share of $1.30 in the prior-year quarter.

Revenues of $16.9 million beat the consensus mark of $3 million. However, the figure declined 99% year over year. The downside can be attributed to 98.8% decline in passenger ticket revenues and decrease of 99.4% in onboard and other revenues.

Expenses & Operating Results

Total cruise operating expenses decreased 68.5% in the quarter under review from the year-ago quarter. However, expenses were associated with suspension of cruise voyages, continued payment of protected commissions and crew costs, which include salaries, food and repatriation costs, and fuel.

Gross cruise costs per capacity day declined 0.2%. Adjusted Net cruise costs (excluding fuel) per Capacity Day were down 0.3% at cc. Fuel price per metric ton (net of hedges) was up 20.5% to $594 in the quarter under review.

Net interest expenses were $114.5 million in the first quarter, up from $66 million in the year-ago quarter.

Balance Sheet

Cash and cash equivalents as of Jun 30, 2020, were $2.3 billion, up from $252.9 million as of Dec 31, 2019. Long-term debt at the end of the second quarter totaled $10.3 billion, higher than $6.1 billion at the end of 2019.

Due to the pandemic, the company’s targeted monthly cash burn is on average, nearly $160 million per month. The cash burn estimate is at the high end of previously estimated range due to additional interest expenses.

Outlook

The company has already withdrawn 2020 guidance on account of the temporary suspension of sailings globally. The company stated the pandemic has impacted its financial position and believes that if suspension is further extended its liquidity and financial position will be affected significantly.

The company expects to report net loss both on GAAP and adjusted basis for the third quarter and 2020. Since the beginning of the coronavirus outbreak, the company’s booking remain below historical levels. However, overall cumulative booked position and pricing for 2021 are within historical ranges.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -18.66% due to these changes.

VGM Scores

At this time, Norwegian Cruise Line has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Norwegian Cruise Line has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.


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